If You Accumulate A Lot Of Money In Your Bank Account You Will Piss It Away
Don't Suck Your Thumb When You Find A Huge Opportunity. Clarity On What You Want Is Step One.
Every Sunday I share 3 Useful Ideas to help you pursue a rich life.
This week:
If You Accumulate A Lot Of Money In Your Bank Account You Will Piss It Away
Don't Suck Your Thumb When You Find A Huge Opportunity
Clarity On What You Want Is Step One
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Let’s dive in 👇
(1) If You Accumulate A Lot Of Money In Your Bank Account You Will Piss It Away
"It’s been said that a full wallet is a little like a full bladder, that you may get an urge fairly quickly to pee it away, and we don’t want that to happen.” - Warren Buffett
What you want is a system of capital allocation that is thought out beforehand so that as the money hits your bank account it gets invested. Each $1 should be working for you to multiply itself. All you should have in liquid funds should be money for your day to day and an emergency fund for the unexpected crisis. That's it.
History is littered with a lot of smart people, who are the best in the world in their respective fields, but end up making dumb money decisions. They risk what they have and need in the pursuit of "more". They don't want to play the long game. They want the shortcut. And shortcuts come with risks that can make you go back to zero.
What you want instead is a simple no bullshit routine for investing in an index fund or a mutual fund (i.e. own some form of a business in some format), month on month, for the next 20 years. Once money comes in, it immediately goes out to make more money for you. As you work to make an income, your money works to outpace inflation and add to its value.
But here is the catch - you can't touch it once it's invested. When you eventually get access to it, more often than not, you will be a millionaire. Its the thinking of the tortoise 🐢 who wins the race. I would pick this certainty over never finishing!
(2) Don't Suck Your Thumb When You Find A Huge Opportunity
Money not made is money lost. Here is a great example from Charlie Munger on this idea:
“When I was somewhat younger, I was offered 300 shares of Belridge Oil. Any idiot could’ve told you there was no possibility of losing money and a large possibility of making money. I bought it. The guy called me back three days later and offered me 1,500 more shares. But this time, I had to sell something to buy the damn Belridge. That mistake [not buying more shares], if you traced it through, has cost me $200 million. And it was all because I had to go to a slight inconvenience and sell something. Berkshire does that kind of thing, too. We never get over it.”
If you're uniquely positioned to identify an opportunity that has a high probability of success then take action! Don't let the status quo continue. Also keep in mind you only get such opportunities a few times in a lifetime.
(3) Clarity On What You Want Is Step One
To determine what you should be doing with your time, energy and money, figure out what outcome you desire.
If you don't know what you desire then just follow your curiosity. Try things you’re interested in. You’ll eventually find what you are good at. That clarity will help you decide where to focus.
Your desired outcomes are not in your control. Your planned inputs are.
The desired outcomes determine your inputs i.e. where you should spend your time, energy and money. The outcome gives you feedback. That feedback helps you tweak your inputs. It’s a never ending loop.
This distinction between controllable inputs and uncontrollable outcomes is vital.
If you get this mental model right, you become emotionally anti-fragile. You won’t panic when outcomes don’t go your way. You’ll also adjust and try another path. While most people capsize in life’s storms, you will remain steady.
Here are some of the most obvious Desired Outcomes → Input relationships:
Monthly Income Desired → Daily job
Muscle Desired → Gym, sleep, diet
Close Relationships Desired → Time with spouse, parents, kids, friends
Happy state of mind desired → Journaling, meditation, walking, sports, purpose
Car and house desired → Save and invest
Memories desired → Plan trips
Financial freedom desired → Invest for decades
Peace at home desired → Give unconditional love
Healthcare desired → Buy the right insurance
It all starts with knowing what you want. That’s the compass. The day to day effort is steering and course correction.
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